KPMG calls for road pricing scheme for Australia

KPMG calls for road pricing scheme for Australia

KPMG Australia is calling for a comprehensive trial of road user charging models across the country. In a paper issued today, Unblocking traffic congestion, the firm estimates that the country’s existing toll roads create an annual $7 billion of economic, social and environmental value per annum.

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Paul Foxlee, KPMG National Sector Leader – Transport & Infrastructure, said: “A well-designed road pricing scheme has the potential to be one of the most effective policy tool for managing congestion. It can help reduce low value travel during peak periods – 21 percent of all trips in the Sydney morning peak hours are for social and recreational purposes. It also provides a valuable additional funding pool for investment in necessary infrastructure.

The underlying principles for road pricing include:

The current cost of providing road infrastructure does not fully reflect its value to users

Without pricing, users are not incentivised to reduce road travel in peak periods or to use alternative modes of transport

Inefficient travel patterns can lead to infrastructure projects being designed to service inflated peak demand, resulting in redundant infrastructure in off-peak periods

Lack of direct pricing is socially inequitable as all residents contribute the same amount to road funding regardless of personal use

Lack of pricing also leads to increased ‘externalities’ – users don’t take into account the increased congestion they create for others

Paul Foxlee further commented: “Respected bodies such as Infrastructure Australia, the Productivity Commission and the Henry Tax Review have all called for a road user charging scheme for Australia. What we need is a proper trial of different models to establish the best pricing regime in each major city. People in our capital cities spend as much time sitting in traffic as drivers in Europe and the US, despite their main cities having much bigger populations. We must get smarter about road usage.”

KPMG Australia estimates that the current 16 toll roads across the country directly contribute $7 billion per year of economic, social and environmental benefits – with the value over a ten-year period being more than $52 billion. Of that, nearly half is productivity-enhancing, so directly improving the quality of Australians’ lives.

KPMG modelling estimates that the country’s GDP is $37 billion higher over ten years due to the operation of these roads. The largest source of benefit is due to travel time savings, followed by vehicle operating cost savings. The third largest source of benefit relates to the changes in accessibility between key transport generators such as employment and residential areas contributing to improvement in labour productivity.

Paul Low, head of KPMG's transport policy and strategy group, and an expert on Smart Cities said: “I would say our estimate of $7billion worth of benefits of toll roads is on the conservative side, and could be interpreted as the minimum level of benefits attributable to the toll roads. This is because our economic analysis considers the accrual of benefits to users of the toll roads only – that is, how much time and vehicle operating costs they save - but not the additional congestion that would be caused by these users if they had to use the non-tolled network. That scenario would potentially result in even greater congestion in each city, causing travel patterns and land use to be significantly different.”

Paul Low added: “Users of our existing toll roads are able to make value of time trade-offs and therefore influence demand through road pricing. There are various different pricing models internationally and this puts Australia in a good position to learn from experience elsewhere and design the right schemes. The developing network of integrated toll roads in Sydney, Melbourne and Brisbane provide the technology and customer foundation to transition to a comprehensive road pricing regime. The time for talking is over and we need as a country to take action.”